Sanchez Energy (SANC34) SWOT Analysis / TOWS Matrix / MBA Resources
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Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sanchez Energy (Brazil)
Based on various researches at Oak Spring University , Sanchez Energy is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, increasing energy prices,
technology disruption, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sanchez Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sanchez Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sanchez Energy operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Sanchez Energy can be done for the following purposes –
1. Strategic planning of Sanchez Energy
2. Improving business portfolio management of Sanchez Energy
3. Assessing feasibility of the new initiative in Brazil
4. Making a NA sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sanchez Energy
Strengths of Sanchez Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sanchez Energy are -
Ability to lead change in NA
– Sanchez Energy is one of the leading players in the NA industry in Brazil. Over the years it has not only transformed the business landscape in the NA industry in Brazil but also across the existing markets. The ability to lead change has enabled Sanchez Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Sanchez Energy is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Sanchez Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sanchez Energy emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Sanchez Energy is present in almost all the verticals within the NA industry. This has provided Sanchez Energy a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Sanchez Energy is one of the leading players in the NA industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Sanchez Energy is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the NA industry. The technology infrastructure of Brazil is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Successful track record of launching new products
– Sanchez Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sanchez Energy has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– Sanchez Energy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive NA industry. Secondly the value chain collaborators of Sanchez Energy have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the NA industry
– Sanchez Energy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Sanchez Energy has one of the best training and development program in NA industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Sanchez Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sanchez Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in NA industry
– Sanchez Energy has clearly differentiated products in the market place. This has enabled Sanchez Energy to fetch slight price premium compare to the competitors in the NA industry. The sustainable margins have also helped Sanchez Energy to invest into research and development (R&D) and innovation.
Innovation driven organization
– Sanchez Energy is one of the most innovative firm in NA sector.
Weaknesses of Sanchez Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sanchez Energy are -
High cash cycle compare to competitors
Sanchez Energy has a high cash cycle compare to other players in the NA industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, Sanchez Energy has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the NA industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, Sanchez Energy has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the NA industry over the last five years. Sanchez Energy even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High operating costs
– Compare to the competitors, Sanchez Energy has high operating costs in the NA industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sanchez Energy lucrative customers.
Low market penetration in new markets
– Outside its home market of Brazil, Sanchez Energy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Sanchez Energy is just above the NA industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Increasing silos among functional specialists
– The organizational structure of Sanchez Energy is dominated by functional specialists. It is not different from other players in the NA industry, but Sanchez Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sanchez Energy to focus more on services in the NA industry rather than just following the product oriented approach.
Products dominated business model
– Even though Sanchez Energy has some of the most successful models in the NA industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sanchez Energy should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in NA industry
– because of the regulatory requirements in Brazil, Sanchez Energy is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the NA industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sanchez Energy is slow explore the new channels of communication. These new channels of communication can help Sanchez Energy to provide better information regarding NA products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Sanchez Energy is one of the leading players in the NA industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the NA industry in last five years.
Sanchez Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sanchez Energy are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sanchez Energy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sanchez Energy can use these opportunities to build new business models that can help the communities that Sanchez Energy operates in. Secondly it can use opportunities from government spending in NA sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sanchez Energy is facing challenges because of the dominance of functional experts in the organization. Sanchez Energy can utilize new technology in the field of NA industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Sanchez Energy to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in NA industry, but it has also influenced the consumer preferences. Sanchez Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sanchez Energy can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Sanchez Energy to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Sanchez Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Sanchez Energy to increase its market reach. Sanchez Energy will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Learning at scale
– Online learning technologies has now opened space for Sanchez Energy to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Creating value in data economy
– The success of analytics program of Sanchez Energy has opened avenues for new revenue streams for the organization in NA industry. This can help Sanchez Energy to build a more holistic ecosystem for Sanchez Energy products in the NA industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Sanchez Energy can use the latest technology developments to improve its manufacturing and designing process in NA sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sanchez Energy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the NA industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sanchez Energy to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Sanchez Energy to hire the very best people irrespective of their geographical location.
Threats Sanchez Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sanchez Energy are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to NA industry are lowering. It can presents Sanchez Energy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the NA sector.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Sanchez Energy needs to understand the core reasons impacting the NA industry. This will help it in building a better workplace.
Consumer confidence and its impact on Sanchez Energy demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in NA industry and other sectors.
Environmental challenges
– Sanchez Energy needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Sanchez Energy can take advantage of this fund but it will also bring new competitors in the NA industry.
Shortening product life cycle
– it is one of the major threat that Sanchez Energy is facing in NA sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sanchez Energy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of NA sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Sanchez Energy will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sanchez Energy in NA industry. The NA industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Sanchez Energy has witnessed rapid integration of technology during Covid-19 in the NA industry. As one of the leading players in the industry, Sanchez Energy needs to keep up with the evolution of technology in the NA sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Sanchez Energy.
Increasing wage structure of Sanchez Energy
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Sanchez Energy.
Weighted SWOT Analysis of Sanchez Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sanchez Energy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Sanchez Energy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Sanchez Energy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Sanchez Energy to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Sanchez Energy needs to make to build a sustainable competitive advantage.